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LLC v. Wabora Newton, LLC

Superior Court of Massachusetts, Suffolk, Business Litigation Session

March 2, 2017

254 Newbury, LLC
v.
Wabora Newton, LLC et al. [1] No. 136614

          Filed March 6, 2017

          MEMORANDUM OF DECISION AND ORDER FOLLOWING JURY-WAIVED TRIAL

          Mitchell H. Kaplan, Justice of the Superior Court.

         INTRODUCTION

         This case arises out of a dispute concerning a commercial lease for a restaurant. The plaintiff, 254 Newbury, LLC, is the landlord (Landlord) and the defendant, Wabora Newton, LLC (Wabora), is the tenant. The Landlord filed this action on June 13, 2016 and an amended complaint on December 16, 2016 (the Complaint). The Complaint is pled in four counts: Count I seeks injunctive relief, but does not allege a separate cause of action; Count Two alleges a Breach of Contract; Count Three asserts a claim for nuisance; and Count IV requests an order of eviction, but does not assert a separate cause of action. Wabora has filed a two-count counterclaim against the Landlord: Count I alleges a Breach of Contract against the Landlord and Count II asserts a claim under M.G.L.c. 93A, § 11.

         The case was tried to the court without a jury on February 15 and 16, 2017. Six witnesses testified and 92 exhibits were admitted in evidence.

         FACTS

         In consideration of the testimony of the witnesses and the exhibits, and the reasonable inference drawn from this evidence, the court finds the following facts.

         The Landlord is a limited liability company which is a part of the Copley Group, a real estate investment and management company owned by Norman Levenson and members of his family. The Copley Group owns and/or manages over 1, 500 residential units and 300, 000 square feet of commercial space in the Boston area, including other buildings on the same block as the property which is the subject of this case. Levenson formed the Landlord to acquire the property located at 254 Newbury Street in Boston (254 Newbury) in 2012. The property consists of a basement (or in Back Bay speak " Garden") unit, which is 1, 300 interior square feet with a patio in front, and four above ground floors, the first of which has three large windows in a bay area typical of the town houses on Newbury Street (the Commercial Space). There are stairs to the right of the patio which lead to the front entry way to 254 Newbury. The front door opens into a foyer with direct access to the Commercial Space, stairs to the floors above, and a door that leads to stairs down to a rear exit at the restaurant level. 254 Newbury lies in the Boston geographic district subject to oversight by the Back Bay Architectural Commission (BBAC).

         When the Landlord acquired 254 Newbury, the four above ground floors were being used as a bed and breakfast (the B& B). The record does not reflect what was in the basement unit. The B& B vacated in August 2014. Sometime thereafter, the Landlord created six residential apartment units in the upper three floors and rented them. The commercial space has been vacant since the B& B moved out.

         Effective October 1, 2012, the Landlord leased the basement to J's Tomodachi, Inc. (J's) pursuant to a written lease (the Lease). The Lease was guaranteed by J's principal, Jae Choi. It was for a term of ten years, with an option for another five. The Lease provided that the only permitted use for the leased space was " a sushi restaurant, and for no other purposes." The restaurant had a kitchen in the back and seating in the front and on the patio, beside the steps down to the restaurant entrance. In the rear, left corner of the kitchen was a fryolator with a ventless hood above it. While J's was operating a sushi restaurant in the basement unit no noticeable restaurant smell existed in the first floor foyer or the Commercial Space, although there was some odor in the stairs leading to the rear exit.

         Minsoo Kim is one of the principals of Wabora; he owns 40% of the firm. He has been in the Asian Fusion restaurant business since 2007; prior to that he was a baseball player and then a scout for the Arizona Diamondbacks. In 2014, Kim was looking for a location to open a sushi restaurant; a mutual friend put him in contact with Choi. Effective April 2015, Wabora purchased the restaurant located in the basement of 254 Newbury from J's, including its equipment and furniture, by means of an asset purchase agreement. Part of that transaction required the Landlord's consent to J's assigning its interests in the Lease to Wabora. That assignment and consent was executed by the Landlord on April 27, 2015.[2]

         Of relevance to this case, the Lease included the following provisions. The initial rent was $9, 533.34, increasing at the rate of 3% per annum in years 2 through 10. It was a standard triple net commercial lease in which the tenant also paid its share of taxes and maintenance. A fryolator could be used, but only if the necessary " government approvals" were obtained and the grease traps cleaned regularly. (There is no evidence in this case of a lack of approvals or improper maintenance.) The lessee was responsible for furnishing outdoor tables and umbrellas. " All Outdoor Equipment must be approved in advance by Lessor in writing." All improvements or alteration to the premises also had to be pre-approved by the Landlord, if the Landlord pays any expenses in connection with any lessee default, the lessee is liable for such expenses, plus interest at 18%.

         The Lease provisions that the Landlord focuses upon in this case are found in Section 7 and Section 21. Section 7 is entitled " Compliance with Laws" and states, as relevant to this ease:

Lessee acknowledges that no trade or occupation shall be conducted in the Leased Premises or use made thereof which shall be unlawful, improper, noisy or offensive, or be contrary to any law or any municipal by law or ordinance in force in the municipality in which the Building is located.
Section 21 states, as relevant to this case:
Lessee further covenants and agrees during the Term and such further time as Lessee holds any part of the leased premises:
d. that Lessee shall not cause any disturbance to any tenant or other occupant of the Property, and shall not otherwise adversely impact any tenant or occupant at the Property.

         Kim only inspected J's kitchen a few times before Wabora purchased the restaurant. He did notice, on at least one occasion, that when J's was in operation, a steel tray had been placed over the fryolator and J's was using a small, home-style fryolator to prepare the fried food it was serving. There was no evidence offered concerning whether J's used the fryolator that it had installed under the ventless hood at all, and, if so, to what extent.

         After the lease was signed, Wabora made substantial expenditures to upgrade the areas of the restaurant which customers would enter, but not the kitchen. While Kim gave consideration to kitchen improvements, including an external ventilation system which would extend over the cooking area (the ventless hood was only over the fryolator) and allow him to expand the menu beyond the items that J's served, he concluded that this would be too costly. A principal reason for this was that kitchen changes would require approval from a number of Boston health and building departments. Also, the external vent would require the installation of a duct running on the outside of the building to its root and this would require BBAC approval. Since Wabora's rent obligation began upon the assignment of the lease, Wabora could not afford the time necessary to make alterations in the kitchen and left it as it had been operated by J's.

         While Wabora was upgrading the interior of the restaurant, the Landlord had some masonry done on the retaining wall outside the restaurant, next to the stairs leading down to the entrance. The mason pointed out to Kim that the brick work in an area immediately in front of the concrete apron that extends from the top of the stairs was in poor condition. He recommended replacing it with concrete. Kim spoke to the Landlord's property manager responsible for this building, Tami Hunter, about the repairs and asked if the Landlord would pay for it. She reported that it would not, and Kim had the mason do the concrete work at Wabora's expense.

         Wabora opened for business on June 24, 2015. It placed a large, tan umbrella on the patio to shade part of the dining area from the sun. The umbrella was among the equipment left in the restaurant by J's. No evidence was offered concerning whether J's had also used the umbrella on the patio, but presumably it had.

         In July or August 2015, the Copley Group retained District Real Estate Advisors (District) as the exclusive broker to rent the first floor Commercial Space. Another broker had the engagement before District, but no evidence was offered concerning its efforts to lease the space during the previous year that it had been vacant. Two District brokers who attempted to lease the space testified: Timothy Bulman and Gregory Feroli. Each testified concerning odors emanating from Wabora's. Bulman testified that there was a strong " cook fry" smell in the foyer and in the Commercial Space itself--the kind that might stick to your clothes. The smell grew stronger in the stairwell in back of the foyer that led to the rear exit. Feroli testified that the smell was that of fried food, like " an Asian restaurant." The two brokers testified to four instances in which prospective tenants did or said something suggesting that the smell dissuaded them from renting the Commercial Space. In November 2015, Feroli showed the space to representative of a company called M-Jemi [phoenetic]. On entering, the representative scrunched her nose and said that they were selling $600 shoes; this won't work for us. In January 2016, Bulman showed the space to Crafted Boutique, a retail business selling antique appearing apparel. There were discussions about a lease, but Crafted Boutique expressed reservations about the smell. In the spring of 2016, Feroli showed the space to two other high end clothing retailers Shop HCV and Roamers & Seekers. Each of these prospective tenants also did or said something suggesting that they were put off by the smell. No evidence was offered that the smell was the only reason the latter three businesses did not sign a lease for the Commercial Space. In July 2016, Bulman sent an email to the Landlord explaining that 254 Newbury's physical location on the block caused some problems and that the Landlord was asking $95 a square foot, plus another $20 " nets" and " real interest is coming in at $6, 500 to $7, 500, ALL IN." The Commercial Space was leased from November 2015, through the first week in January 2016, to a so-called pop-up tenant that wanted it on short notice for the holiday season for $7, 500 a month.

         It is difficult to find the extent of an odor based on oral testimony of sensory perception, but the court finds that there was a very noticeable Asian fried cooking smell in the foyer and the Commercial space and this would have certainly detracted from the desirability of the space for use as a store selling high end apparel. The court will take judicial notice that such a smell may be retained on clothing that is exposed to it for a lengthy time.

         The Landlord first notified Wabora of its concerns over the odor in an email dated December 3, 2015 from Hunt to Kim. Hunt writes that she " just heard from the broker that when they are showing the space above your restaurant there is a very strong smell coming from the restaurant . . . This is reported recently so I need you to determine what is different so this can be corrected asap." [3] ...


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